India’s GDP stands tantalizingly close to $4 trillion. According to projections from the International Monetary Fund, it could edge up to $4.27 trillion by the end of 2025. This trajectory should inspire pride — and it does — but it also evokes a more urgent question: Is India on the cusp of sustained prosperity, or on the brink of stagnation?
Had the pandemic not disrupted global supply chains and domestic demand, the country might already have touched the aspirational $5 trillion milestone. That goal, popularized by Prime Minister Narendra Modi’s government as a symbolic economic benchmark, now looks deferred but not derailed. Still, beneath the arithmetic lies a deeper story — one about the shape of India’s future and the many forces, domestic and global, pulling it in competing directions.
From this point forward, India faces two divergent economic paths. One leads to the dreaded middle-income trap, where nations plateau after reaching moderate levels of development. The other opens up a snowballing growth momentum — one in which rising income, innovation, and productivity feed on each other to create exponential expansion. China, for the past two decades, exemplified this path. The question is whether India can.
What Is the Middle-Income Trap — and Why It Should Worry India
Coined by economists to explain why some nations stall midway through development, the middle-income trap occurs when a country outgrows its low-cost labor advantage but fails to transition into a high-productivity, innovation-driven economy. Japan’s post-1990s slowdown is often cited as a cautionary tale. Thailand and Brazil also bear scars of stalled transitions.
If India falls into this trap, its economy may hover in the $4-6 trillion range for decades. The consequences would be stark: a swelling but underemployed workforce, stalling urban expansion, and a demographic dividend that transforms into a liability as the population ages without becoming truly prosperous.
For a nation that adds over 10 million people to its labor force annually, stagnation is not an option — it is a ticking social and economic time bomb.
The Alternative: Snowballing Growth
The other route available to India is more ambitious, more hopeful — and more difficult. It involves triggering what economists call “snowball growth,” where the gains of growth themselves generate further momentum. Infrastructure investment boosts logistics efficiency, which enhances manufacturing competitiveness, which attracts foreign capital, which finances further infrastructure — and so on.
China’s 20-year journey offers a model, albeit one with significant caveats. While China’s centralized political system and top-down economic planning differ sharply from India’s democratic and often chaotic setup, the principle of compounding growth remains universally relevant.
To replicate such a trajectory, India needs to accelerate not just GDP numbers but productivity, innovation, digital access, and institutional capacity. It must modernize without marginalizing; liberalize without fragmenting.
The Global Chessboard: Who Wants India to Fail?
Every economic rise has geopolitical ripples. India’s ascent threatens to displace established hierarchies, particularly in Asia. It is thus naïve to assume that the path forward is only blocked by internal inefficiencies. External forces also shape — and sometimes sabotage — national trajectories.
No country has more to lose from India’s rise than China. Beijing’s regional dominance — economic, technological, and political — is directly challenged by a confident, assertive India. As New Delhi weaves closer ties with the West, participates in supply chain realignments, and asserts itself in global forums, China’s strategic calculus becomes more adversarial.
The United States, paradoxically, stands both as India’s biggest enabler and a potential competitor. Washington has every reason to support India as a counterweight to China — and yet, if India grows too fast, it will eventually challenge American economic supremacy. For now, though, the U.S.-India partnership remains mostly constructive, driven by mutual interests in defense, technology, and democratic alignment.
Pakistan, meanwhile, lacks the capacity for long-term strategy but remains a willing pawn in larger geopolitical games. Its utility lies not in initiating disruption but in enabling it. From cross-border terror to trade obstacles, it plays a role — minor, yet persistent.
Modi 3.0: Trial by Fire
India’s third Modi term, if secured in 2024 elections as many anticipate, may prove far more challenging than the previous two. The honeymoon of reforms is over. The low-hanging fruits — like GST rollout, Jan Dhan accounts, or digital payment infrastructure — have largely been plucked.
What remains is hard governance: taming inflation without stifling growth, creating jobs that match a tech-driven economy, navigating environmental and climate stress, and upholding institutional integrity in an increasingly polarized polity.
This is a trial by fire. The Modi government, once celebrated for bold reforms and strong leadership, now faces the uphill task of navigating global economic uncertainty, internal political dissent, and simmering geopolitical conflicts — all without losing momentum.
India’s structural challenges persist: patchy education outcomes, overreliance on informal labor, skewed regional development, and persistent inequality. If these are not addressed systematically, India’s growth may turn brittle, vulnerable to shocks, and socially unsustainable.
Internal Cohesion: The Underappreciated Growth Engine
No economy rises on the back of GDP numbers alone. Internal cohesion — political stability, social harmony, and institutional trust — is essential for sustained development. This is where India’s vulnerabilities could be most acute.
Religious polarization, judicial bottlenecks, media distrust, and widening wealth gaps have the potential to sap national energy. Even the most well-crafted economic policy can fail if it lacks public legitimacy or if its dividends are cornered by the elite.
In an era of information overload and global scrutiny, governance is not just about policy — it’s about perception, participation, and performance. India must find a way to harmonize ambition with inclusion, nationalism with pluralism, and development with dignity.
What Needs to Be Done — Urgently
The way forward is clear — and crowded with tasks.
- Boost high-value manufacturing: India’s push for semiconductor fabs, defense exports, and renewable technology must scale — quickly and credibly.
- Invest in human capital: A young population is only an asset if it’s skilled, healthy, and productively engaged. Vocational training, AI literacy, and public health spending need a quantum leap.
- Deepen institutional reforms: From judiciary to policing to urban governance, India needs leaner, faster, and more accountable systems.
- Modernize agriculture: Farm distress isn’t just an economic issue — it’s a political landmine. Supply chains, storage, and agri-tech need a mission-mode push.
- Champion green growth: Climate resilience is not optional. India must lead in carbon markets, clean mobility, and energy innovation.
A Moment of Destiny
India’s moment is not just about crossing a dollar-denominated threshold. It’s about whether the country can defy historical patterns. Few postcolonial nations have achieved both democracy and prosperity. India is among the very few that can.
If the country plays its cards right, the next 10-15 years could define not just its own future, but the very architecture of the 21st century world order. India could emerge not merely as a regional power, but as a civilizational leader — one that offers an alternative model of development rooted in freedom, diversity, and resilience.
And yet, as any observer of history will tell you: destiny doesn’t wait forever. It knocks — once, maybe twice. And then it moves on.
The choices India makes in the coming years will determine whether it becomes a snowballing economic force — or just another nation that nearly made it.
By Subhash Kumar Suman
